Creating value is what really matters

Image showing figure joining jigsaw puzzles, representing connecting the pieces to add value
source: freepik

The purpose of organisations is to create value.  That seems obvious but if you take a close look at most workplaces you will see lots of time and money spent on things that don’t add value.  Remote decision-making holds up work. Inventory ties up cash. Property is underutilised.  Smart people can’t contribute fully.  Processes aren’t fit for purpose.  Systems constrain rather than enable people.

Businesses naturally create value

Firms have a strong incentive to create value.  Value builds shareholder, staff and customer loyalty which drives growth. Markets send value signals and a business can respond to those signals. Businesses have value propositions that create gains and reduce pains for customers.  Firms build business models to realise their value propositions. They create assets, hire people and build systems and processes to produce products and services.

Standardisation creates efficiency and consistency and enables continuous improvement. But that is not enough. Firms must seek new markets, new products and new ways of working.  If they don’t embrace innovation, competitors will do. Despite the natural incentives to create value, many firms still fail to do so consistently. On the other hand, some initiatives really embrace the idea of better value chains.

Providing good value is the essence of business

Government naturally creates activity

Public services seldom have willing buyers, competition, a profit motive or clear market signals to tell them whether or not they are creating value. They rely on processes, rules, their internal quality culture and their political masters to adjust their value propositions.  Annual reports focus on activity rather than outcomes, as the Auditor-General has said recently:

“Reporting often gives little useful information for either the public or Parliament to effectively scrutinise the performance of these public organisations. There are few other areas of our lives where we would accept paying for services with no comprehensive understanding of what we received for the money we spent.”

Currently there are public service cuts in New Zealand but the focus is on job cuts – often ad hoc ones.  There is little focus on reducing long term waste and creating lasting value for the public. There are four main reasons for that:

  1. Salaries are the biggest cost for the public sector
  2. Political cycles favour a short-term focus
  3. Public sector organisations don’t sell in an open market so don’t get clear value signals
  4. The public sector rarely uses tools like value stream mapping or value chain analysis

Identify and remove waste to focus on value

Public servants are not more lazy or wasteful than anyone else. That doesn’t mean they are always set up to succeed. There are lots of ways the public sector could cut waste and add value more systemically.  I have seen lots of them, here are a few examples:

  • Stop, or don’t start, all projects that have poor strategic alignment or no measurable benefits
  • Use simpler software instead of huge ERP systems where only 5-10% of functionality is used
  • Systemically identify waste in processes and drive it out and focus on value creation
  • Stop paying people as managers when they have no staff and no financial delegation
  • If routine decisions have to go up through 3-5 levels of management, change the rules
  • Release information proactively instead of insisting on a bureaucratic OIA process

 Providing good value should be the essence of public service.

Phil Guerin, Consultant/Director, Hague Consulting Ltd. © Hague Consulting Ltd 2024.

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